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Gigging ‘Round the World: Regulating the Global Gig Economy

What exactly is the gig
economy? According to Ute Krudewagen,
partner in DLA Piper’s Silicon Valley office, it’s the new labor market where millenials
seek to leverage the digital economy through more dynamic working arrangements.

Many of Krudewagen’s Silicon Valley clients are tackling the question
of how to “lawfully engage individuals across the globe on a daily basis.” If
you’re also engaged in this new labor market, odds are your operations don’t
stop at the “Great
Great Wall.”

Krudewagen and her colleagues Adam Hartley
and Nicholas
Turner—heads of DLA Piper’s United Kingdom and Australia Employment
Practices, respectively—provided attendees of a recent BNA webinar with a tour de force survey of how the “gig
economy” and other modern work arrangements are being addressed by countries
across the globe.

New Paradigms, New Challenges

According to Krudewagen, twenty to thirty percent of the working age
population in the U.S. is engaged in some form of independent work. The
explosion of non-traditional working arrangements isn’t limited to the U.S.
Independent workers are the fastest growing labor group in the European Union
market today. India fills about 40 percent of the world’s freelance jobs.

This model comes with its share of challenges, including “the lack of
access to job security, unemployment insurance, worker’s compensation
insurance, disability insurance, and minimum wage protections,” she said. A
recent New York Times article warned
certain global markets are creating “a new generation of perma-temps,” she noted.

In response to these challenges, social pressures for stronger workers’
rights and protections and governments’ desire for more efficient capture of
taxes on non-traditional labor have resulted in virtually every country trying
to tackle this issue in different ways.

The U.K. Reviews Its “Worker”
Model

The U.K., for example, employs a unique hybrid “worker” status category
somewhere between traditional employees and independent contractors, Hartley
noted. These “workers” enjoy many rights shared by full employees, including
minimum wage and discrimination protections, holiday pay and pensions.

According to Hartley, “when we start to look at the categories beyond
the employee, the three cornerstones of the test” for "worker" status are
mutuality of obligation, control and workers’ right to “substitute” for one
another if they can’t turn up for work.

A trend in U.K. litigation is for gig workers, such as Uber drivers, to
assert “worker” status to ensure they receive these heightened benefits. By
contrast, Hartley said, if someone is “genuinely self-employed” in the U.K.,
they’re only entitled to discrimination protections.

Currently, several high profile reviews of the U.K.’s gig economy are
underway.

The prime minister tapped Matthew Taylor, chief executive of RSA
Insurance Group, to lead an independent
review on how employment practices can keep pace with modern business
models. This review focuses on workers’ security, pay, and the balance of
rights and responsibilities.

Meanwhile the Business, Energy and Industrial Strategy Committee (BEIS)
launched a select
committee on the future of work, focusing on the status and rights of
agency, self-employed and “gig” workers. BEIS also is looking into pay and
working conditions of people in these non-traditional roles.

“We’re really seeing a potentially new or extended definition of
workers, focusing that definition on peoples’ control and economic dependency,”
as well as a tax-shift towards the employer and a greater focus on wealth,
social security and benefits for people classified as workers, Hartley said.

There
hasn’t been the same intensity of focus on worker status and the gig economy in
other EU countries as in the U.K. Hartley attributed this to stronger
individual employment rights and more clearly established worker classification
models among continental member states.

The European Commission has provided guidance on the application of
existing laws to new business models, he said. It has encouraged member states
to look at whether their national rules are adequate to cover the needs of
self-employed workers and whether further guidance is needed in this area of
the economy. Hartley anticipates further legislative pushes by the EU into this
area and believes that “in due course, the EU will come up with a more uniform
definition of worker.”

To that end, members of the European Parliament (MEPs) have provided a
resolution recommending a “floor of minimum rights” for all workers, including related
tax and social security reforms, decent working conditions and a clear
distinction between genuine self-employment and employee status.

Union Challenges in Australia

In Australia, you are either an employee or an independent contractor –
there’s no middle ground—and the factor tests are very similar to those utilized
in U.S. jurisdictions.

According to Turner, Australia has expressed significant interest in
the gig economy and worker classification. Unlike the U.S., unions in Australia
are still very strong, and workplaces are highly regulated. Those unions are in
the process of challenging various types of worker classification arrangements.

Further, employee misclassification is a serious offense, and directors
can be personally liable for fines and interest.

Approaches in Asia

There are a number of different approaches to contingent workers in
Asia, from the very flexible to the extremely restrictive, Turner said. A
number of countries significantly limit the use of contingent workers.

The misclassification risk is the same in Asia as it is elsewhere in
the world, he said. Numerous Asian jurisdictions—China among them—recognize
independent contractor status only under exceptional circumstances, if at all.

Further, labor leasing of agency workers is often more highly regulated
in Asia than in Australia or the U.K., Turner added. The Philippines, for
example, prohibits labor leasing arrangements. Even traditionally “light touch”
jurisdictions like Hong Kong and Singapore are facing pressure to increase
regulation of these types of modern work arrangements, he noted.

There’s also significant regulation throughout the region that prevents
employers from renewing fixed-term worker arrangements. In Japan and South
Korea, for instance, once engaged for a set period, workers typically are converted
to full-time regular employees, irrespective of the original underlying
contractual arrangements.

Canada and Brazil

The Americas are no exception to the international patchwork of
approaches to regulating gig workers. Krudewagen said Brazil is an expensive
jurisdiction if you have misclassified individuals due to its significant labor
regulations. Until recently, labor courts hadn’t really recognized gig workers
as employees, but such cases are working their way through the system, she said.

In Canada, the British Columbia Supreme Court recently applied a
“substance over form” approach to define the modern employment relationship in
a way that elevates employer actions as more probative than the underlying
employment contract.

Getting It Right

“We’re going to see a spread of increased regulations around the world
to protect individuals working under these types of arrangements, whether they
establish a new worker classification or deem them to be employees for a
particular purpose,” Turner said. This is where the focus will be over the next
12 to 24 months, he projected.

With a trend towards greater regulation across so many legal
jurisdictions, how can you mitigate risks for your clients?

Hartley suggested keeping the following universal “do’s” in mind:

Carefully consider your business model and engagement
options.

Ensure the correct relationship is in place from
the beginning.

Ensure individuals understand the implications
of their status.

Where possible, engage with the entity as
opposed to the individual.

If there is a third-party intermediary between a
company and workers, bargain for a favorable allocation of liabilities through
robust representations, warranties and indemnifications.

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